Humbled giants eye business phone market

August 13, 2009

Nokia e71LONDON, Aug 13 (Reuters) – Once they were warriors battling one another on the digital battlefield. Nowadays, Microsoft and Nokia are worriers, huddling together for comfort.

The world’s top phone and software companies need each other to compete with Apple, Google and Blackberry-maker Research in Motion (RIM), whose products increasingly define what users expect from phones and charge premium prices in consequence.

In the market for so-called “smartphones”, Deutsche Bank estimates Apple and RIM now take home more than half of all profits, despite producing less than a third of high-end mobile phones. Nokia held a 45 percent share of the smartphone market in June, according to Gartner Inc. (Table 2 in Gartner release)

The news this week that Nokia will feature Microsoft’s office software — features such as Word and Excel — on phones aimed at business users is symbolic of what is possible rather than significant in itself. It fell short of predictions in the gadget trade press that Nokia might introduce phones running on Microsoft’s own Windows Mobile software.

But that doesn’t mean their collaboration should be dismissed. There’s more to this budding relationship than meets the eye.

First and foremost, Microsoft and Nokia say they are taking on the Blackberry email-phone, a must have among corporate professionals. So far the they haven’t done very much, for all the big talk. But they have pledged to make Microsoft Outlook work smoothly on Nokia phones.

This is crucial in overcoming Blackberry’s key advantage — the underlying software that companies rely on to securely manage corporate e-mail.

The opportunity here is that corporate technology managers are no longer content to supply only Blackberry devices but are gearing up to support a wider range of devices and software systems, reflecting shifting user tastes and demands.

Microsoft and Nokia need one another because despite being leaders in their respective fields — computer software in Microsoft’s case and phones for Nokia. But these powers have not translated into dominance in the era of converged devices.

To some extent, they have themselves to blame. The two giants spent the first half of the decade at war with one another over Microsoft’s bid to enter the mobile phone business with its Windows Mobile software and Nokia’s half-hearted attempts to do the reverse and expand its presence in computer

Years of legal and technology standards battles resulted in a stalemate. Windows-based phones number only a little over 20 million in a market of billions, and Nokia has made only tentative steps to enter computer tablet or netbook computer markets. Nimbler rivals have exploited these distractions.

Microsoft isn’t the only technology giant Nokia is cuddling up to. In June, the Finnish company announced that it would team up with computer chip king Intel Corp on chips for future phones. Nokia was careful this week to underscore that the Intel deal is about future generations of Nokia products while the Microsoft ties are for phones in the here and now.

Whether or not Nokia sells some Windows-based phone models or Nokia eventually introduces a mini-netbook computer running Windows software is largely irrelevant to the central problem these two companies face.

Microsoft and Nokia must create differentiated products that help users do things Apple and Research in Motion cannot do. Otherwise these two giants face marginalization in the era when phones become computers.

You can read some of Eric’s recent columns here.

(Photo: Reuters/Vivek Prakash, Singapore)


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Nice article, Eric. Also in terms of what it elegantly understates – that nobody in the lucrative U.S. phone market is remotely satisfied with their phones or the cost of ancillary services the subscriber has to come up with.

There’s a lot of room for growth, if somebody would just listen to what the customer wants and deliver something like that instead of slowly bleeding users to death with costly add-ons and phony rebates instead of decent service at a fair price on a not-too ugly handheld device series.

Apple’s iPhone is a promiscuous lifestyle product unhappily married to the ogres of AT&T while flirting with the enterprise user market. Microsoft has Windows and Outhouse to contend with, tripping over its own necrotic brand software in the process of whatever they might try to do next. The Windows decal on any phone is a deterrent to buying it, at this point. I mean, what size of chip would one really need to store all the viruses and spam you’d be getting if one went down the MS route? That one hasn’t been invented yet.

At times like these, one might expect your last sentence to ring true with the makers and sellers of such devices. Hopefully, they’ll get the message soon.

Posted by The Bell | Report as abusive

How about the users’ personal data protection?

Posted by James | Report as abusive

Harnessing customers into a contract to keep them in business does not show confidence or truth in business practices.Providing what they claim is the biggest and best Network service available, customers will naturally be willing to subscribe . It shouldn’t be legal. Most people hate contracts and in the end who ends up losing?

Posted by THE SPIDERWEB | Report as abusive

If Microsoft were to eventually merge with Nokia maybe they could call the resulting firm Necrosoft?

Posted by JT | Report as abusive

I love that, I wish I could go and see it!

very nice i like it thanx alot

Posted by Sovia | Report as abusive

Apple is doing greater then ever with it idevices.

Posted by tariqjamil | Report as abusive